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Of Interest to Publishers 



of 



Scientific Journals 



Measuring Efficiency in Manufacturing on a 

Basis of Profit 



Read at the regular monthly Meeting of the 

American Society of Mechanical Engineers 

November 12th, 1912 



By ^^^ 



EDWARD B.«5PASSAN0 

Member of the Society 



BALTIMORE 

WILLIAMS & WILKINS COMPANY 

1913 



Of Interest to Editors 



The following paper was prepared by request for presentation before The Amer- 
ican Society of Mechanical Engineers. It illustrates the development by the 
author, who is Manager of the Waverly Press, of organization methods in applying 
the principles of scientific management as taught by Mr. Frederick W. Taylor 
and his followers. As Mr. Charles B. Going, editor of the Engineering Magazine, 
states in his discussion, ''While the fundamental principle of profit as a basis 
for measuring efl&ciency of production is new and important, .... the 
paper does not distinguish any new factors or combination of factors, but it pro- 
poses a new datum from which to measure the total results .... likely to 
be influential because reform is much more likely to be stimulated by a realization 
of loss than by the belief that profits have been merely reduced." 

It is not intended to advance the idea that the one object of business is profit, 
but to emphasize that without profit business cannot exist. With complete and 
accurate knowledge of cost of production full value of product and service can 
be delivered to each individual customer on every order. The results of such 
methods are to maintain an equal rate of profit on each order, instead of an 
average profit on the total business, with some orders showing a loss and some 
an excessive profit, and makes possible a minimum charge to the customer for 
the work done. 

This subject is indirectly of interest to you as a publisher, an editor, or an author, 
inasmuch as it shows conclusively that an organization developed and operated 
under such a system is capable of producing a higher standard of product, a higher 
degree of service, and a greater value to its customers in both of these important 
lines of effort. 

With the development of this system in the organization of our shop the good 
results that can be obtained are already apparent, and are continually increasing. 
We are producing a high standard of workmanship, we are operating under a 
much more positive system of scheduling which gives prompt service, and the 
real value of the product of our press is greater than it ever has been before, 
and is unsurpassed, if equalled, by that of any of our competitors. We have 
demonstrated this to the satisfaction of others, and we are prepared to show you. 

•..•"' WAVERLY PRESS 

WiLLIAAIS & WiLKINS COMPANY, PROPRIETOR 

Baltimore, U. S. A. 



P3 



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MEASURING EFFICIENCY IN MANUFACTURING ON 

A BASIS OF PROFIT 

Rankin's definition of efficiency is: '^The ratio of useful work 
produced to the energy expended/' a very reliable basis for deter- 
mining the efficiency of a steam engine or any power producing 
machine or equipment. The general definition of efficiency given 
in Webster's Dictionary is ^^effectiveness or the power to pro- 
duce results." 

The term results as used in connection with business is syn- 
onymous with gain. The efficiency of a business or industrial 
enterprise is rated in proportion to the percentage of profit 
earned. 

In the application of the term efficiency to the management 
of a business or an industrial enterprise, it becomes what might 
be called relative or comparative efficiency; that is, the work of 
an operative or a machine is efficient to a degree, as compared 
with an established standard or ideal of production. 

Both the engineer and the accountant in their work of meas- 
uring and recording production, attempt to measure and record 
efficiency, but the methods which they employ do not give accu- 
rate and complete results. The subject of cost accountancy has 
received during recent years a great deal of attention in all 
branches of industrial enterprise. The determination of hour 
cost has been the object of the accountant. Hour cost without 
a means of measuring and recording production still retains the 
element of guess-work in that the product per hour has to be 
estimated. 

This is the fundamental weakness of the accepted systems of 
cost accountancy in general use today. As the cost accountant 
studies hour cost it is natural that he should in recording effi- 
ciency adopt the productive or chargeable hour as the basis for 
determining the efficiency of an operative or machine. It will 
suffice here to point out the unreliability of efficiency records that 

1 



2 EDWARD B. PASSAXO 

are obtained on such a basis. For example: A machine may be 
running ten hours on productive time, and if the work day is ten 
hours, the cost accountant rates the efficiency of the machine at 
100 per cent; but no cognizance is taken of the amount produced 
per hour. In other words, the accountant's percentage of effi- 
ciency is the ratio between the actual hours of production charged 
to an order, and the total hours of the work period, without 
taking into consideration the amount produced in the period. 

The engineer in studying the problems of management has 
adopted mechanical production as the basis of his work. He has 
estabhshed, after careful scientific investigation, what is usually 
termed a standard of production, that is, the amount that should 
be produced in a given tune. In determining this standard a 
standard unit of measurement for each element of production 
must be established. This standard, complemented by a system 
of recording the production of each operative and machine and 
on each operation enables him to find the productive efficiency 
on each operation and of each operative or machine by taking 
the ratio between the actual amount produced and what has 
been established as the standard amount to be produced, ^liile 
this is an advance over the accountant's method, still it does 
not give a true record of efficiency. 

Neither accountants nor engineers by their present independ- 
ent methods and their different units of measurement get the 
true record of efficiency in terms of profit and loss. True effi- 
ciency is the ratio between the percentage of profit on the cost 
of what is actually produced and what would be the profit if 
the standard amount of work were produced. 

Veblen states in his Theory of Business Enterprise that the 
all-dominating issue in business is the question of gain and loss. 
Gain and loss is a question of accounting, and accounts are kept 
in terms of the monetary unit, not in terms of livelihood, not 
in terms of serviceabihty or vendability of the goods, nor in 
terms of the mechanical or productive efficiency of the industrial 
or commercial plant. Since the efficiency of a business is finally 
determined in terms of profit and loss, every individual depart- 
ment of that business should be determined on the same basis, 




^>3-^. 



MEASURING EFFICIENCY IN MANUFACTURING 6 

and every unit of production, either operative or machine, should 
be determined and expressed in the same terms. 

Every one famiUar with the conditions of industrial enterprise 
knows that an increase of productive hours does not necessarily 
mean profit. Going a step further, increased production per 
hour, or even full or maximum production of a machine or fac- 
tory does not necessarily mean profit. Still, as profit is the only 
true test of efficiency, then the efficiency of a plant or its com- 
ponent parts should be reckoned in terms of profit and loss, and 
not in terms of mechanical production or in terms of productive 
hours. To illustrate, an example may be taken of a very ele- 
mentary form of business, that of shoveling coal, in which the 
operatives are hired by the hour. According to the system of the 
accountant for determining efficiency, if the operative shoveled 
coal without interruption during the full period of work, irrespec- 
tive of the amount he shoveled, he would be rated 100 per cent 
efficient. A method for determining efficiency by which a rating 
of 100 per cent would stand for variable amounts of product, 
and represent either a profit or loss, is certainly unreliable to say 
the least. 

The engineer in handling the problem would, after the proper 
selection of the shovel and standardization of working conditions, 
determine the standard amount to be shoveled in an hour. That, 
let us say, is a ton. Then the man who shoveled this standard 
amount would be rated 100 per cent efficient. 

To test this method of determining efficiency, suppose that 
the operative's wage is 50 cents per hour, that the total expense 
burden of the business amounts to 50 cents per hour, and that 
the shoveling of coal is sold at $1.50 per ton. This would bring 
a profit of 50 cents per hour, equal to 50 per cent of cost equal 
100 per cent efficiency, when the standard or full amount is 
shoveled by the operative. If an operative shovels only half a 
ton per hour, he will, according to the engineer's method of 
determining efficiency, be rated as a 50 per cent efficient work- 
man. Now, let us consider the question of cost and profit in 
this case. The wage for the operative becomes $1 per ton, the 
expense burden $1 per ton, a total cost of $2 per ton. This 



4 EDWARD B. PASSANO 

represents a loss of 50 cents on each ton, instead of a profit of 
50 cents or — 25 per cent of cost instead of plus 50 per cent, and 
shows the actual efficiency to be minus 50 per cent. Eminent 
engineers who have made a study of management and efficiency 
have said that cost of production has nothing to do with the 
selling price. That is true to a certain extent, because the mar- 
gin of profit, which is the difference between cost and the selling 
price, can be figured according to the demands of the situation or 
the conditions of the sale. That is to say, it may be expedient 
to reduce the margin of profit in order to close a large contract, 
and thus save a greater loss in fixed expenses, if there is not 
sufficient work on hand for the facilities of the plant, or it may 
be advisable to reduce the margin of profit in order to obtain an 
entering wedge into new territory. Profit is controlled also by 
such trade conditions as competition, supply and demand, etc. 
Although variation in the margin of profit changes the percent- 
age of efficiency, still efficiency, when determined on a basis of 
profit and loss, shows to the management results which give the 
true value of each unit of production in the organization, and 
which bring to the surface the necessity of more efficient work 
when the margin of profit is low. The greater the margin of 
profit a commodity will stand over and above the cost of pro- 
duction, the more inefficiently the work may be handled without 
wiping out the gain completely. Under a correct system of meas- 
uring, when the efficiency of an operative, of a machine, or of any 
operation is at zero, it is a signal that no profit is being made. 

To illustrate, take for example the case of the common hen. 
All have heard probably of the 200-egg hen, the hen that lays 
200 eggs in 365 days. This is the standard set by breeders of 
the laying machine. Suppose that the average market price of 
eggs during the year is two cents each, making the gross return 
from a standard hen $4. The feed for this hen (which corre- 
sponds to the wages of the workman) is one-half cent a day, 
equaling $1.83 a year. All other expenses, such as gathering the 
eggs, cleaning the coops, marketing the product, etc., amount, we 
will say, to $0.94 a year, giving a total expense of $2.77. This 
leaves a net profit of $1.23 on what we will term a standard hen. 



MEASURING EFFICIENCY IN MANUFACTURING 5 

A hen that lays 100 eggs a year would, according to the engi- 
neer's method of determining efficiency, be rated at 50 per cent. 
Now let us see what becomes of her when her efficiency is deter- 
mined on a basis of profit and loss. Her product is worth $2, 
while her expense remains the same, $2.77, therefore, she is kept 
at a loss of 10.77 and her efficiency on a basis of profit and loss 
is approximately minus 62 per cent. It is not difficult to imagine 
what would become of such a hen after her true worth was known. 
She would probably lose her head. 

The machine process, the basis of all modern industrial enter- 
prise, is a comparatively new element in business. Not very 
long ago, production was for livelihood only, and not for profit 
in the sense of accumulating wealth. A printer was a printer 
to make a living, likewise the carpenter, and so in all lines df 
trade; but the advent of the machine revolutionized production 
and placed industrial enterprise on a footing fully equal in vol- 
ume and value to that of trade and commerce. 

Accountancy as generally taught and practised was designed 
for the business of trading, in which merchandise is bought 
according to certain standard units of measurement, and sold on 
the same basis. The function of bookkeeping, according to such 
systems, is to record the transactions of business, keeping a 
record of the items of expense, and distributing the same as a 
burden of expense on the merchandise handled. In industrial 
enterprise, merchandise is bought according to certain established 
standards of measurements, the same as in trade, hut it is not 
sold on the same basis. It is converted into other forms of 
production by the use of labor and machinery. Labor is pur- 
chased by the hour and is combined with merchandise, but as 
there have been no standards of measurements of production of 
labor established, true cost of production cannot be, in any sense, 
accurately predetermined. 

Accountants take the position that it is not their function to 
establish standards of measurements. Even accepting this state- 
ment, it does not seem reasonable for them to establish a sys- 
tem of accountancy based on false premises. In other words, the 
determination of hour cost is only elementary. It is true that 



6 EDWARD B. PASSANO 

it is the first step toward obtaining accurate cost; but without 
the estabHshing of standard units of measurement of production 
in an industrial enterprise, and a system of recording production, 
true unit costs of the elements of production cannot be prede- 
termined, but can only be obtained after the work on an order 
is completed, and this is always too late to prevent a loss. A 
merchant might as well buy a carload of sugar, and in selling it 
by the pound guess at the weight. By keeping a record of his 
receipts from the sale of the sugar, he would find out after the 
carload had been sold whether he had made a profit or not. 

In all industrial enterprise practically the same condition exists 
in the purchase of labor. It is bought by the hour, but the pro- 
duction per hour is estimated or guessed at. Therefore, it is 
not putting it too strongly to state that the work of the accountant 
has not kept pace with the development of industrial enterprise, 
and that the ordinary systems of bookkeeping are inadequate 
to the requirements of the same. 

The engineer in his work of establishing standard units for 
measuring production and in recording production is doing good 
work for the industrial enterprise. The inaccuracy of the results 
he obtains is due to the fact that his method of measuring effi- 
ciency is based on mechanical production, which is not the true 
unit of measurement of industrial or manufacturing efficiency, 
and, as has been shown previously, does not give true records 
of efficiency. Increased production usually increases the effi- 
ciency of an establishment by increasing profits, but it does not 
necessarily follow that such is the result. 

This is the weakness of the situation. The accountant is not 
sufficiently trained in the technicalities of industrial conditions, 
and the engineer has not sufficient knowledge of the technicalities 
of accountancy. These two departments of manufacturing busi- 
.ness should be brought into close relationship, and both should 
work on the same basis of measurement in recording their work 
and results. If this is done, the work of the accountant and 
that of the engineer will both be simplified and materially cheap- 
ened, and the records obtained will be of much greater value to 
the organization. For example, when the engineer determines 



MEASURING EFFICIENCY IN MANUFACTURING 7 

on a new method of operation designed to increase production, 
the full value of his work will be determined by true efficiency 
records as a definite profit or loss, expressed in dollars and cents 
and not in mere increased mechanical production. 

The accountant will probably say that such a system involves 
a great deal of bookkeeping. That may be; but is it not just 
as important to have a standard for measuring production, and 
a method of recording production in an industrial enterprise, as 
it is to have the same means of measuring goods bought and 
sold in ordinary business or trade? 

A merchant could not exist very long, if his business were 
conducted on a basis which was without the means of measuring 
his purchases and sales. It is true that many years have been 
spent in trade. Probably the reasons why standards of measure- 
ment have not been attempted in industrial enterprise is because 
industrial enterprise, comparatively speaking, is in its infancy, 
and also because there are more standards to establish. But if 
it is a basic necessity which has been brought to the surface 
more forcibly in recent years on account of closer competition 
and smaller margins of profit, then the sooner the task of estab- 
lishing these standards in all lines of work is undertaken, the 
greater will be the returns to those who have their money invested 
in the enterprise, and to the world at large. There is certainly 
a broad economic problem involved in the situation. 

To combine the work of the engineer and accountant in apply- 
ing the general principles of what is termed "Man and Machine 
Records" to the operation and management of business, tradition 
must be set aside, and new methods and supplementary princi- 
ples must be accepted by both. It is possible that these methods 
at first sight may appear absurd when considered in the light of 
established usage, but as expedients they will be necessary. They 
can be made to produce records of cost and efficiency which 
will be accurate and reliable, even if not in accordance with 
accepted practice, and the results will certainly justify the means. 
To repeat, the term results as used in connection with business 
is synonymous with gain: then the true efficiency of business 
or industrial enterprise must be rated in proportion to the per- 



8 EDWARD B. PASSANO 

centage of profit earned. Therefore, the engineer and accountant 
must learn to think in terms of profit and loss and not in terms 
of production or hour cost. 

It has been shown: (a) that the true measure of efficiency 
in manufacturing must be recorded in terms of profit, not in 
terms of productive hours, nor in terms of amount produced; 
(b) that some definite standard of profit must be established; 
and (c) that any profit between actual cost and the established 
standard profit shows efficiency varying between zero and 100 
per cent. A loss is recorded as minus efficiency. Zero efficiency 
indicates that actual cost has been covered. One hundred per 
cent efficiency means that the maximum amount of profit is 
earned. 

Is it possible to combine the work of engineer and account- 
ant so as to record efficiency in terms of gain, in order that each 
step in production may be accurately measured instead of wait- 
ing until all the steps have been taken to get at the profit? The 
answer to this question is that such methods are now being 
successfully introduced. 

Every business of manufacturing can be divided into a number 
of elementary operations and individual units. Each one of the 
simple operations is called an element of production. Cleaning 
the coops, gathering the eggs, feeding the hens are elements of 
production in the case of the egg business before referred to. 
Any individual part of an organization that produces, whether 
operative or machine, is a unit of production. The hen and the 
boy who feeds her are both units of production. 

First, it is necessary to establish the actual cost of each simple 
operation or element. The cost of each job, take or order, can 
then be determined. 

Second, it is necessary to establish, (a) the standard produc- 
tion for each element, that is, the maximum production possible 
to attain when working under standard conditions, and (b) the 
standard for each unit, individual or machine. After this has 
been done, the profit that should be earned under such con- 
ditions can readily be determined, and it becomes the standard 
profit. This standard profit is taken as the basis for determin- 



MEASURING EFFICIENCY IN MANUFACTURING 9 

ing efficiency. Thus, having established the standards for meas- 
uring production and having recorded the amounts produced by 
each element and unit, the actual profit earned can be deter- 
mined. The efficiency is the ratio between the percentage of 
actual profit and the percentage of standard profit. 

The efficiency of a unit can be made up from the efficiency 
of several elements, depending «upon the different kinds of work 
that an operative or machine is handling. The efficiency of an 
element can be made up from the efficiency of a number of oper- 
atives or machines. To illustrate, a workman in a machine shop 
being a unit of production might work at a lathe half a day at 
an efficiency of 80 per cent, the other half working at the bench 
at an efficiency of 60 per cent. Then his efficiency as a unit 
of production for the day would be the average between the two, 
or 70 per cent. The lathe work on a given size machine, being 
an element of production, may represent the work of one or 
more operatives. The first may show an efficiency of 80 per 
cent, another 50 per cent, and the third 70 per cent. So the 
efficiency of the element would be the average of all. 

In establishing the standards of production and profits on the 
elements of production, it is necessary to establish standard costs 
of each element. In order to determine the actual cost^ at any 
time, it is necessary only to divide the standard cost by the 
percentage of efficiency of the element, and actual cost is ob- 
tained. For example, if the standard cost of an operative or 
operation be $1, the actual cost of operative or operation marked 

1.00, 
50 per cent efficient will be ~z^r^ or $2. Thus it will be seen 

0.50 

that the determination of cost becomes a very simple part of 
accountancy, when the work, of the engineer is combined with 
that of the accountant. 

In the best recognized cost accounting practice, the selling 
price is obtained in the following manner: First the total cost 
of manufacture is found, then the general administrative and 
sales expenses are added, and to this result is added the per- 
centage of profit to be earned. 

^Emerson, Harrington, Twelve Principles of Efficiency. 



10 EDWARD B. PASSANO 

For convenience and simplicity it is recommended that cost 
shall include all items of expense, and that the normal profit which 
is to he earned when working under standard conditions shall be 
treated as an expense and included in the cost, just in the same 
way as interest on the plant investment, surplus, and working 
capital and loss through depreciation are considered items of 
expense. On first thought to treat profit as an expense may 
be considered absurd, but if we are to detennine efficiency on 
a basis of profit and loss, to do so will simplify the process very 
much. 

On such a basis there are three sources of loss to be considered : 
First, the loss sustained by a workman or machine consuming 
too much time; second, the loss sustained by idle equipment, 
due to absence of an operative from work, lack of work, acci- 
dents, etc.; and third, the loss through actual spoilage. Now, 
if loss through inefficiency is to be considered as a possible profit, 
as it most certainly should be, then the profit which would have 
been earned on such lost time and material must also be con- 
sidered. For this purpose, the adoption of the machine rate 
process as presented by Hamilton Church is necessary. ^ When 
the expectant profit is considered as an item of expense, and is 
included in the machine rate, then such loss is taken care of 
automatically. Further, the machine rate should be based on 
ideal or standard conditions and should carry all items of ex- 
pense, including the expectant profit, exclusive, however, of 
labor. 

To illustrate the loss incurred by taking too much time we 
will refer again to the example of the hen. The reason why 
a hen lays only 200 eggs a year is because there is a molting 
season, and also a period when there is a desire in most breeds 
to set. During these periods eggs are not produced, so if the 
periods of molting and setting are prolonged there is a loss in 
production due to taking too much time. 

To illustrate the loss sustained by idle equipment: Suppose 
that the hen is turned loose in the neighbor's garden and that 
she lays her eggs in the neighbor's barn. The expense, exclu- 

2 Church, Hamilton; Expense Burden. 



MEASURING EFFICIENCY IN MANUFACTURING 11 

sive of the wage, still goes on without production and the profit 
thereon. The equipment is there for taking care of her, she 
comes home to roost, the coops have to be cleaned, etc. 

To illustrate the loss through spoilage: The hen may lay the 
eggs but break them in the nest. The expense and wage still 
go on, but the production is lost and the profit thereon. There- 
fore to determine the true value of the hen, records should be 
kept only of the eggs laid at home, and from these the eggs 
broken in the nest should be deducted. 

The value of similar records to an industrial management can 
be readily seen. 

In the first case of loss, the excess hours should be charged 
at the full rate of cost including the normal profit and labor. In 
the second case, the time lost through idle equipment should be 
charged at the machine rate, and without the labor rate. In 
the third case, the hours lost through the spoilage of work should 
be charged at the final cost rate including labor and profit, plus 
the merchandise spoiled, to which should be added the expect- 
ant profit thereon. 

By totaling these three items of loss whenever they occur and 
substracting the sum from the profit on the number of standard 
hours produced, the result will be the actual profit or loss on 
the operative or machine for the given period. The ratio between 
this amount and the established standard profit for the same 
period will give the true rate of efficiency. 

By establishing standards of production and profit of each 
unit and element of production, the standard of the whole organ- 
ization will be the total of its standard units, and the efficiency 
of the whole will be the total of all of its units. 

By including the normal profit to be earned under standard 
conditions in the item of cost, the management can determine 
at any time the percentage and amount of profit being earned. 
For example, allowing everything in an organization to be 100 
per cent efficient, if the standard profit be 20 per cent, then if 
the total efficiency is 50 per cent the profit earned is 10 per cent. 
If the amount of business done during the period is $100,000 
the profit earned is $10,000. When the efficiency of the whole 



12 EDWARD B. PASSANO 

or any part becomes zero there is no profit; when it becomes 
minus, there is a loss. 

This plan enables the management to know positively how 
the organization is running. It not only brings to the surface 
the unprofitable units of production, but keeps them there con- 
stantly, showing absolutely and positively that they are unprofit- 
able and to what extent they are. 

One method by which this plan can be practically put in use 
by the bookkeeper is to open an account for each cause of ineffi- 
ciency and charge the loss sustained thereby to this account, 
and thus carry it through the profit and loss account. As an 
illustration, suppose that a grain merchant located in Baltimore 
buys 100,000 bushels of spring wheat which is shipped to Balti- 
more and stored in a grain elevator. While in transit and in 
storage the grain becomes seasoned and dries out. When it is 
sold, it is found that it has shrunk to 99,000 bushels. This 
shrinkage would be taken care of by opening a shrinkage account, 
and the loss sustained thereby would be a direct loss to the busi- 
ness. The grain merchant would be interested not only in know- 
ing the loss through shrinkage on each lot of wheat, but also on 
the other grains he handled, the barley, corn, rye, etc., and the 
total loss from shrinkage on all. As well say that loss through 
shrinkage cannot exist, as that loss through inefficiency cannot 
exist. It does exist, and can be taken care of from a bookkeeping 
standpoint, provided of course, that standard units of measure- 
ment of production of labor are established, and the actual pro- 
duction of labor is measured and recorded. 

Another method, and probably a better one, for an industrial 
enterprise, is to treat the loss through inefficiency as a supple- 
mentary rate of cost. To do this, the machine rate of cost must 
be established, as previously explained, on standard production, 
and each cause of loss through inefficiency carried as a separate 
supplementary rate, which, when added to the basic machine 
rate and labor cost, will give the total cost. This method will 
show at all times loss through inefficiency, if any, for as many 
divisions or causes as it is found expedient to establish, and it 
has the advantage over the first method in that it is carried on 



MEASURING EFFICIENCY IN MANUFACTURING 13 

the cost record sheet as a definite amount of loss expressed in 
dollars and cents on each productive hour, keeping constantly 
before the management the inefficiency of each department. 

Naturally the thought will come that there are conditions 
which affect production and profit for which the workman is not 
responsible. This is true, and such loss should not be charged 
against the efficiency record of the operative or machine. 

One of the fundamental principles which is accepted by all 
accountants is that all items of expense should be charged directly 
to the department or production factor whenever it is possible 
to do so; that there should be no common dumping ground, so 
to speak, for expense items to be distributed on a percentge or 
some similar basis. In the same manner all inefficiency can be 
chargeable to someone; it may be to the management, to the 
sales department, to the planning department, or it may be nec- 
essary, in the event of fire or cyclone, to charge it to the dispen- 
sation of Providence. 

It must be accepted as a basic truth that all loss through 
inefficiency which represents a potential or possible profit in the 
enterprise is chargeable to someone. If such items are reckoned 
in terms of profit and loss expressed in the monetary unit of 
measurement, they can be carried through the general books of 
the concern in accounts opened for that purpose. When a state- 
ment of the business is taken, the balance sheet will show not 
only the profit or loss of the business as a whole, but it will show 
the loss through inefficiency, a possible profit, which should have 
been earned. Further, in the departmental statement, this loss 
through inefficiency will be shown, and it can be traced to each 
production center of a department and to each individual oper- 
ative and machine, if desired. The records will show then not 
only the profit as a whole, and the potential profit, which is the 
loss through inefficiency, but it will direct the loss to each indi- 
vidual or unit of production of the whole organization. 

Without a means of measuring efficiency in manufacturing it 
is impossible to locate the units and elements that are inefficient. 
Therefore the profits of the efficient units and elements are lessened 
by the inefficient, and may be entirely neutralized. When the 



14 EDWARD B. PASSANO 

hen does not lay a profitable number of eggs she loses her head. 
It is not practical to cut off the heads of the workmen who do 
not produce a sufficient amount to earn their wage. Under the 
military form of shop management, if it is known positively that 
a workman's production is without profit to the organization, he 
is discharged. Under the modern form of scientific shop man- 
agement the plan is to study the working conditions, and by 
standardizing the equipment and method of operation, and by 
training the workman, raise his efficiency.^ This makes him a 
self-supporting unit of society, instead of a parasite, living on 
the production of his fellowmen. It benefits not only him and 
his employer, but the community in which he lives, and the 
world at large, by raising the standard of life in general, eliminat- 
ing his share of waste, and helping posterity by creating a pre- 
disposition in his offspring to a higher degree of efficiency. Such 
effort to train the workman is parallel to that of the breeder 
of the hen, viz., to produce a strain that can and will lay the 
standard 200 eggs a year. 



3 Gantt, H. L., Work. Wages and Profit. 



k 



One Result of Standardization 

The type faces, size of page, margins, paper, and binding of 
this pamphlet represent one of the standards we have established 
for scientific publications. This standard has been adopted by 
the following journals: 

American Political Science Review 
American Journal of Anatomy 
Anatomical Record 
Journal of Comparative Neurology 
Journal of Morphology 

Joiu*nal of Pharmacology and Experimental Therapeutics 
Journal of Experimental Zoology 
Phytopathology 

Proceedings of the Entomological Society of Washington 
Proceedings of the Philosophical Society of the Univer- 
sity of Virginia 
Proceedings of the "Washington Academy of Sciences 
The Plant World 

Realizing the economy in cost of production as well as in 
library storage and binding which could be accomplished by 
establishing a typographical and mechanical style for scientific 
journals, the specifications represented by this pamphlet were 
adopted. 

The question of paper was carefully investigated. The paper 
finally selected combined the essential qualities requisite for such 
work. Sufficient rag is used in combination with thoroughly 
washed sulphite to give wearing strength, permanency in texture 
and color, good printing qualities, neutral color and mellow sur- 
face for ease in reading, and opacity without a deteriorating 
amount of mineral filler. 

The selection of types, type page, and margins was made to 
obtain legibility of text as well as a pleasing color tone of the 
whole. 

The specifications finally adopted show the combined results 
of both typographical and paper experts, and certain modifica- 
tions due to the valuable suggestions received from a number of 
the leading editors of scientific journals of the country. 




LIBRARY OF CONGRESS 



030 012 494 P 




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LIBRARY OF CONGRESS 



030 012 494 ^ 



